21 August 2020
The UK national debt has reached £2tn as government spending hit an all-time high amid the COVID-19 crisis. Ordinarily this would ring alarm bells, but now is the time for the government to be bullish and invest for long-term economic benefits.
With interest rates at an all-time historic low, the cost of servicing government debts is lower than initially predicted meaning that it can currently increase its spending at an incredibly low cost. The government should take advantage of the situation to borrow for long-term financial return and tackle systemic challenges in the economy. The government would, for example, do well to:
- proactively supporting SMEs to seize new opportunities notably through the creation of a Growth Accelerator scheme;
- reforming UK insolvency and administration practices to build confidence and foster an environment for entrepreneurial risk taking;
- changing the Apprenticeship Levy to an Apprenticeship and Skills Levy and introducing a rebuttable right to retrain to transform productivity and drive growth;
- investing in green infrastructure supporting a net-zero recovery and future business sustainability; and
- investing in infrastructure projects that will support business growth and productivity such as faster broadband and better road and rail infrastructure.
If the government uses this unusual situation in the right way, it can certainly turn challenge into opportunity.
Andrew Harding, FCMA, CGMA
Chief Executive – Management Accounting
The Chartered Institute of Management Accountants, part of the Association of International Certified Professional Accountants